Energy Efficient Buildings Enjoy Tax Benefits

by | Apr 8, 2014 | Financial Services

The energy policy act is used by the IRS and was formed by Congress in 2005 and commonly referred to as Section 179D. A multitude of businesses already enjoy the tax benefits of being energy efficient. The Section 179D tax deduction is a little known tax deduction that can be utilized by commercial businesses that have installed energy efficient systems and built their buildings with energy efficiency in mind. The Internal Revenue System created the EPACT 179D tax deduction to reward businesses and lessees that invested money in their buildings to comply with energy efficiency regulations with high standards. An older building can also benefit from the 179D tax deduction by conforming to new energy standards. Such standards cover interior lighting, HVACs and the building envelope.

Who Can Take Advantage of EPACT 179D Deductions?

  •  Owners of Commercial Buildings that Are Energy Efficient Certified
  •  Multi-Family Building of the Residential Nature that Are Four Stories in Height
  •  Commercial Buildings Renovated or Built After 2005 or Before 2014
  •  Buildings Converted to Be Classified as Commercial Buildings
  •  Buildings for Industrial Purposes
  • Architects, Engineers and Designers of Government Buildings that Are Energy Efficient

Understand the Poorly Understood 179D Deduction

The 179D deduction was created to provide a tax reduction of significant size for commercial buildings that have been renovated to meet current energy efficiency regulations. The requirements for the tax deduction may change and fluctuate with changing energy standards, as well. This type of tax deduction is a single accelerated depreciation that is overlooked by many commercial building owners.

How Can a Commercial Business Qualify for the 179D?

In order to qualify for 179D tax deduction, the Internal Revenue Service requires that an independent party analyses and inspects the premises and certifies their finding via an energy tax study. Energy qualifications are set by industry standards from 2001, and must be met in order to be qualified as being energy efficient. There is a maximum deduction of $1.80 per square foot, which has three sub categories. Those categories are $0.60 each and include lighting, HVAC and the building envelope. All figures are based on the square footage of a commercial building. Structures that that are 20,000 square feet should absolutely take advantage of this tax break due to the sheer size of the building.

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